Gary L. Neale

Chairman & Chief Executive OfficerNiSource Inc.

NiSource Inc. common stock is listed and traded on the New York, Pacific and Chicago stock exchangesunder the symbol NI. The shares are listed in financial stock quotations as NISOURCE. As of Dec. 31, 2004,NiSource Inc. had 50,020 registered common stockholders.

Common Stock Dividend DeclaredAt its meeting on Jan. 6, 2005, the board of directorsdeclared a quarterly dividend of $0.23 per share,equivalent to $0.92 per share on an annual basis.

Anticipated Dividend Record and Payment Dates

NiSource Common

04-29-05 05-20-0507-29-05 08-19-0510-31-05 11-18-0501-31-06 02-20-06

NIPSCO Preferred

03-16-05 04-14-0506-16-05 07-14-0509-16-05 10-14-0512-16-05 01-13-06

Investor and Financial InformationFinancial analysts and investment professionalsshould direct written and telephone inquiries toNiSource Investor Relations at 801 E. 86th Ave.,Merrillville, IN 46410 or (219) 647-6083.

Free copies of NiSource’s financial reports are available by writing or calling the Investor Relationsdepartment at the address or phone number listedabove. The materials are also available atwww.nisource.com.

Stockholder ServicesGeneral questions about stockholder accounts, stock certificates, transfer of shares, dividend payments, automatic dividend reinvestment andstock purchase plan, and electronic deposit may be directed to Mellon Human Resources & InvestorSolutions at the following:

Mellon Human Resources & Investor SolutionsP.O. Box 3315South Hackensack, NJ 07606or85 Challenger RoadRidgefield Park, NJ 07660

(888) 884-7790

TDD for Hearing Impaired(800) 231-5469

Foreign Stockholders(201) 329-8660

TDD Foreign Stockholders(201) 329-8354

www.melloninvestor.com

Record Date Payment Date

Record Date Payment Date

Stockholder Information

Stockholder InquiriesMellon Human Resources &

Investor Solutions

(888) 884-7790

Analyst InquiriesInvestor Relations

(219) 647-6083

Media InquiriesCommunications

(219) 647-6200

NiSource Inc. 801 E. 86th Ave. Merrillville, IN 46410 www.nisource.comThis document contains “forward-looking statements,” including earnings guidance for fiscal year 2005. For a discussion of factors that could cause

actual results to differ materially from those contained in such statements, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the NiSource Inc. annual report on Form 10-K included herein.

The certifications of our Chief Executive Officer and the Chief Finanical Officer have been included as Exhibits 31.1 and 31.2 to our Form 10-K, as required by theSarbanes-Oxley Act. In addition, in 2004, our Chief Executive Officer provided to the New York Stock Exchange the annual Chief Executive Officer certification

regarding our compliance with the New York Stock Exchange’s corporate governance listing standards.

Contact Us

“It is not the strongestof the species that survive,nor the most intelligent,

but the one most responsive to change.”

Charles Darwin

The Art of TransformationNiSource Inc. 2004

NiSource Inc.

2004 Message to Stock

holders

“A permanent state of transition is man’s most noble condition.” Juan Ramon Jimenez

Dear Fellow Stockholder:

We all know that change is nothing new. In fact, a fewthousand years ago, an ancient Greek philosopher,Heraclitus, said:

“You can’t step twice into the same river,” and“Nothing is permanent but change.”

Those words are even more true today in the energy industry.

We’ve certainly experienced a series of cyclical changes inthe last 15 years in our part of the industry. Since 1990, ourindustry has come full circle: from bricks-and-mortar, rate-regulated utilities to high-growth “energy” conglomeratesdriven by non-regulated activities and commodity trading, and back to the current asset-based regulated utilities.Anticipation of business cycles drove our vision 10 years agoto transform NIPSCO Industries, Inc., a steel industry-dependent local combination utility, into the super-regionalintegrated natural gas company that NiSource is today.

Believing that a relatively small, predominantly electric utilitywould be hard pressed to survive – much less grow – weembarked on a disciplined effort to reposition our company.NiSource today derives 100 percent of its operating incomefrom regulated operations, and is predominantly a natural gascompany serving a market area covering 30 percent of theU.S. population and 40 percent of the nation’s energyconsumption. NiSource has access to every major U.S.natural gas supply source, including the Gulf of Mexico, theChicago Hub, the Appalachian Basin and liquefied natural gas

(LNG) terminals. We serve the key energy consumptionmarkets in the Midwest, Mid-Atlantic and New Englandregions. We are also the leader in market area storage fornatural gas.

On the pages that follow, we will describe for you what thetransformation that NiSource set in motion means for you, our stockholders, and how our business strategy will growthe company and your investment in the future. We hope youagree that we’re embarking on an exciting and prosperousnew era.

The year 2004 represented an important step in NiSource’stransformation. We reported yet another year of improvedincome from continuing operations, despite the impact ofunfavorable weather on the company’s natural gas andelectric utility businesses. Summer temperatures weresignificantly cooler than normal in our northern Indianaelectric market, while weather in our natural gas marketswas somewhat warmer than normal for the year. Wecontinued to hold the line on operation and maintenancecosts, strengthened our balance sheet and lowered interestexpense. These positive efforts largely offset the adverseimpact of weather.

A Financially Strong 2004

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$191

$398

$426

$430

2001

2002

2003

2004

Income from Continuing Operations(in millions)

40%

33%

27%

Regulated Gas Distribution

Regulated Gas Transmission

& Storage

RegulatedElectric

Operations

2004 Operating Income

Debt reduction remains one of our primary financialobjectives, an objective toward which we have already madesignificant progress. After the acquisition of the ColumbiaEnergy Group in 2000, NiSource had about $8 billion in debt,or a 68 percent debt-to-capitalization ratio. At the end of 2004,our debt level was down to about $6 billion, or about a 57 percent debt-to-capitalization ratio.

We have not only reduced our debt by $2 billion, but we haverestructured the components of our debt as well. At the endof 2004, NiSource’s short-term debt stood at about $300 million, down from $2.5 billion four years earlier. And, infact, the $300 million was less than the short-term workingcapital needs of the company. This is important because thebond markets and credit rating agencies view our overalldebt structure more favorably when there is a closer balancebetween short-term working capital needs and short-termdebt on the balance sheet.

As this report goes to press in mid-March, NiSource has noshort-term debt outstanding, and more than $300 million ofshort-term cash investments.

Other major accomplishments during 2004 included theimplementation of regulatory and commercial strategies inkey states that benefit both customers and stockholders,such as the renewal of Customer CHOICEsm in Ohio. Also, the NiSource pipelines completed the renegotiation of long-term contracts with their largest customers and made notableprogress with several major transmission, storage andaccess expansion initiatives.

The first major step in this business strategy was to ensureconsistency of leadership for the growth years beyond 2005.On October 26, 2004, the Board of Directors elected Bob Skaggs, a 24-year veteran of the company, to the positionof President of NiSource. We have been working togethersince then as the Office of the Chairman to set in motion thelong-term strategy that will continue to build a strongfoundation for growth in stockholder value for years to come.

We consider 2005 a base year, from which we will continueexpanding the foundation to generate future growth anddevelopment. It will be a year of slightly lower earningsexpectations as we meet the following challenges:

• Current-year revenue reductions from regulatoryproceedings.

• A full year’s financial impact of pipeline renegotiations withmajor customers.

• Higher depreciation expenses and a rising interest rateenvironment.

• Increased capital spending to expand and grow our corebusinesses.

The objective of our transformation process for 2005 andbeyond is long-term, sustainable growth – growth without

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Short-Term Debt $ 0.84

Current Maturities $ 0.84

Long-Term Debt $ 0.84

Total Debt

$ 0.84

$ 0.84

$ 0.84

$ 0.84

$ 0.84

$ 0.84

$ 0.84

$ 0.84

$ 0.84

12/31/01 12/31/02 12/31/03 12/31/04

$1,854

$411

$6,065

$8,330

$913

$1,225

$4,850

$6,988

$686

$118

$5,993

$6,797

$307

$1,300

$4,836

$6,443

Total Debt (in millions)

“If you focus on results, you will never change. If you focus on change,you will get results.” Jack Dixon

A Balanced and FocusedGrowth Strategy

undue risk. NiSource’s approach is balanced, and focused on our income statement and both sides of the balance sheet.Our growth strategy is hard-asset based and centered onfour key initiatives:

• Pipeline growth and expansion.• Broad regulatory and commercial initiatives premised on

existing assets.• Ongoing financial management of our balance sheet.• Aggressive cost management.

We are committed to following this disciplined approach andgrowing earnings in future years. This will enable us, as earlyas 2006, to reevaluate our quarterly dividend payout. Wecontinue to believe that a dividend payout ratio of 55 percentto 60 percent of earnings is in the best interest of thecompany and our stockholders, and we anticipate that withearnings growth will come dividend growth.

NiSource has responded to our industry’s “back to basics”focus on regulated core businesses with a simple, clear andbalanced business strategy designed to address short-termfinancial challenges, while establishing a platform for long-term, sustainable growth.

NiSource today derives 100 percent of its operating incomefrom regulated operations. We operate the third largestnatural gas distribution business in the United States, serving3.3 million customers in nine states; the fourth largest pipelinebusiness in the nation, with approximately 16,000 miles ofinterstate pipelines; one of the largest gas storage networksin the country, with approximately 646 billion cubic feet (Bcf)of capacity within our market area; and a mid-size regionalelectric business serving 446,000 customers in northernIndiana operating with 3,392 megawatts of generatingcapacity.

We plan to further capitalize on this market position and ourkey strengths, which include:

• Our extensive footprint and strategic location, serving amarket area covering 30 percent of the U.S. population and40 percent of U.S. energy consumption.

• Our tactical access to the major natural gas supply points in the U.S., including planned new LNG facilities.

• Our expertise in developing innovative, win-win solutionswith regulators and our customers.

• Our cost management discipline, which has helped usreduce operation and maintenance expenses by nearly $200 million in the last four years.

• Our employee team, which has great depth of experienceand industry knowledge and which capably provides safe,reliable service to our 3.7 million gas and electriccustomers every day.

The year 2005 will set the stage for earnings growth in 2006and beyond, with key initiatives that include:

• Pipeline Growth. We are pursuing prime, long-term growthopportunities along our interstate pipeline system,particularly in the Northeast and Mid-Atlantic regions. Thenew Millennium Pipeline and Hardy Storage projects aretwo working examples, with more to come.

• Regulatory and Commercial Initiatives. We expect steadygrowth from our core gas and electric businesses. Our gasand electric utilities added more than 60,000 customers lastyear. We believe rate cases, trackers and other commercialand regulatory initiatives can enhance those core results.

• Financial Management. We will continue taking steps torefinance our debt structure, reduce interest costs andmaintain our investment grade credit ratings.

• Cost Management. To help balance our lower earningsexpectations in 2005 with our commitment to greaterinvestment in our core businesses, we are reviewing arange of existing and new processes to help us manageoverall costs and free up additional capital for investment.

The two largest issues facing the natural gas industry arelimited infrastructure and North American supply –

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2005 Initiatives ProvideEarnings Potential

Our Strengths ProvideCompetitive Advantage

“We must obey the great law of change. It is the mostpowerful law of nature.” Edmund Burke

Pipeline GrowthOpportunities Continue

particularly in the growing Northeast gas market. NiSourcehas the assets and expertise to build infrastructure in theform of pipes and storage that will help solve many of theshortage problems to this key market, while earning attractiveinvestment returns for the company.

Over the past two years, we’ve conducted extensive studiesof our entire gas transmission network to determine the bestopportunities for NiSource to expand our system into thesegrowing markets. We’ve looked at supply and demanddynamics in our markets.

We did a complete modeling of our pipeline system, long-term, under a variety of supply/demand scenarios. Along theEastern seaboard, into the Northeast, peak demand isgrowing and growing, and supply, because of infrastructure,is constrained – and becoming more so every day. As aresult, during peak periods, the price of natural gas in parts of the Northeast has reached upwards of $60 per dekatherm(Dth) at times when gas was selling for about $6 to $7 per Dthin the Midwest.

A dwindling supply of Canadian gas imports is also part of theproblem. Not only is Canadian production declining, butdemand in that country is increasing, which translates to lessavailable gas for the eastern United States. At the same time,demand for natural gas to fuel electric generation in theNortheast is growing by double-digit figures. There is growingproduction of natural gas in upstate New York, but even here,there are limited pipeline systems to bring this natural gas tomarket.

Many industry experts continue to point to LNG to help easethe supply and demand imbalance for the region. Consideringthe lead time required to build new LNG tanker vessels andreceiving terminals, LNG probably wouldn’t make a significantimpact until 2009 or later – and even then, additional storagewill be required to justify the “base load” tankers, along withnew pipeline capacity to move the LNG to market.

What this means for NiSource is opportunity. Our pipeline andstorage facilities will play a major role in the storage andmovement of LNG to Northeast markets.

The results of our analysis relating to our Midwest markets,particularly Ohio, show high system utilization and modestgrowth. We believe that will continue. Market indicators pointto continued long-term reliance by Midwest gas utilities onour pipeline system.

In Virginia and the Mid-Atlantic states, again, supply isconstrained and peak demand is growing on a seasonalbasis, while storage availability is limited. These findingswere borne out in our pipeline recontracting subscriptionprocess – all our East Coast customers signed on, and did sovia long-term contracts.

We are responding to these market demands with a numberof new pipeline and storage projects. For example, ourColumbia Gas Transmission subsidiary entered into apartnership in 2004 to develop a major new undergroundnatural gas storage field from depleted production fields inHardy County, W. Va.

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Millennium Pipeline

NiSource Pipeline

NiSource Storage

NiSource’s Responseto the Northeast Market:

Millennium Pipeline

“Two roads diverged in a wood, and I – I took the one less traveled by,and that has made all the difference.” Robert Frost

The Hardy Storage project fits well with NiSource’s strengthas one of the nation’s largest and most experiencedunderground storage operators. The project’s storagecapacity is fully subscribed under long-term firm contracts.

Columbia Gas Transmission also will integrate storage andaccess to supply by expanding its pipeline to deliver gas fromHardy Storage to East Coast markets. Hardy Storageanticipates filing a project application with the Federal EnergyRegulatory Commission (FERC) in 2005, with plans to beginconstruction later this year. The first storage injections areplanned for spring 2007.

Meanwhile, we continue to make progress on the newMillennium Pipeline. In the long term, we believe this projectwill help reduce gas price volatility problems in the Northeastmarkets and will form our new gateway to that growingregion.

Millennium will provide supply access to a number ofsignificant supply and storage locations, including the Dawn,Ontario, and Leidy, Pa., trading hubs. A 186-mile section ofMillennium from Corning to Ramapo, N.Y., is expected to be inservice for the heating season of 2006-2007. Nearly 100 percent of the route will utilize existing rights of way, andthe pipeline will transport 500,000 Dth of natural gas per dayfrom Canada and upstate New York to key pipelineinterconnections at the Hudson River.

By providing the natural gas industry with much-neededstorage capacity and transport in the Northeast and the Mid-Atlantic, both Millennium Pipeline and Hardy Storage could

immediately begin to ease the eastern markets’ vulnerabilityto extreme gas price volatility and the lack of operationalflexibility, brought on by the lack of infrastructure to meet thegrowing demand.

We can’t solve the market’s pressing needs for energy byourselves. NiSource believes long-term national policysolutions that add new gas supply and provide for thedevelopment of much-needed infrastructure in the U.S.markets must include: construction of the Alaskan pipeline;additional drilling in the Rockies; increased supplies ofliquefied natural gas; and a more rational, expedited processfor siting and permitting new and enhanced infrastructure, allof which must be incorporated into and supported by a newNational Energy Policy. The time to act on natural gasprice/supply issues is now!

NiSource also realizes the importance of maintaining,improving and growing our local natural gas and electricdelivery systems. We’re committed to providing reliableenergy for our customers and positioning our systems forongoing growth, while ensuring facility investments continueto produce optimal returns for the company.

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Hardy Storage &Transmission

NiSource Pipeline

NiSource Storage

and

Hardy Storage

“In the middle of difficulty lies opportunity.” Albert Einstein

Safe, Reliable DistributionSystems Remain Key

To this end, in Ohio, we plan to complete the 25-mile NorthernLoop expansion project in the Columbus area within a year.This project is part of a 10-year plan designed to enhanceColumbia Gas of Ohio’s ability to serve new and existingcustomers in portions of Franklin and Delaware counties. Delaware County is the fastest growing county in Ohio andone of the fastest growing counties in the nation. Also, toimprove the integrity of our Columbia Gas of Pennsylvaniadelivery system, ensure safety and reliability to existingcustomers and accommodate future growth, we are investingin additional system improvements in 2005. In the Northeast,we’re proposing to regulators programs that will replacelegacy bare steel and cast iron pipe systems, while“tracking” the costs of those investments with real-time rateriders or rate adjustments.

In our electric business, we will continue working with theCity of Gary, Ind., on the transfer of ownership of our idled D. H. Mitchell Generating Station to accommodate lakefrontdevelopment and airport expansion. We shut down the 60-year-old, coal-fired Mitchell plant in January 2002 becauseof environmental costs and new regulatory requirements ofthe Midwest Independent System Operator (MISO) that callfor more flexible and quickly dispatchable sources of electricpower to meet our high variable load profile – requirementsthis station was not designed to meet.

Meanwhile, our Whiting Clean Energy facility expects tofinalize a new steam contract with the BP oil refinery inWhiting, Ind., is bidding to supply utility power in conjunctionwith its affiliate, EnergyUSA-TPC, and is well positioned tosell power in what we believe will be an improved Midwestmarket for wholesale electricity during the summer of 2005.

We continue our focus on building positive relationships withregulators and other key stakeholders in each of our ninestate jurisdictions and at the national level with FERC.Regulatory solutions that benefit our customers, regulatorsand the company are important to our strategy of sustainingfuture growth. Maintaining safe, reliable and expandabledelivery systems is a “win-win-win” – it is perceivedpositively by the company, our customers and our regulators.

The concept of “sharing mechanisms” is not new toNiSource. Our distribution companies have been successfulin obtaining regulatory approval for “rate trackers,” as oneexample, which provide the company with gradual revenueincreases over a period of time to recover costs associatedwith pollution abatement equipment and replacement of baresteel and cast iron pipe. Trackers are negotiated withregulators without committing the time, expense and otherresources – on the part of regulators or the company – thatwould be required of a traditional rate case. And customersbenefit from a cleaner environment and safer and morereliable utility infrastructure.

We also have been successful in executing other regulatorycompacts at our gas and electric distribution companies thatwe believe to be among the industry’s most innovative.Northern Indiana Public Service Company (NIPSCO) and its

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Gary L. Neale, Chairman & CEONiSource Inc.

Merrillville, Ind.

Stephen P. Adik, Retired Vice ChairmanNiSource Inc.

Merrillville, Ind.

Dr. Steven C. Beering, President EmeritusPurdue University

West Lafayette, Ind.

Arthur J. Decio, Chairman and DirectorSkyline Corporation

Elkhart, Ind.

Board ofDirectors

“In any moment of decision, the best thing you can do is the right thing, the nextbest thing is the wrong thing and the worst thing you can do is nothing.” Theodore Roosevelt

Regulatory SolutionsProvide Mutual Benefits

Indiana gas customers began to mutually benefit from a one-year pilot program this past winter to help low-incomecustomers pay delinquent utility bills and natural gasdeposits. The “NIPSCO Winter Warmth” energy assistanceprogram is funded through a surcharge on customers’ gasbills and also a contribution from NIPSCO. And in Ohio thispast year, the Public Utilities Commission extended ColumbiaGas of Ohio’s Customer CHOICEsm program through December2007, while allowing the company to continue to recoverassociated transition costs. Columbia Gas of Pennsylvaniasubmitted a filing in September 2004 to offer a fixed pricenatural gas commodity option for its residential, commercialand industrial customers. Also in Pennsylvania, legislationenacted recently will provide utilities more balanced tools forresponding to low-income customers and collections issues.

We expect other forms of “win-win-win” arrangements thatwill create collective value, both here at NiSource and atutilities across the country. NiSource utilities will pursuecommercial business opportunities, available within theparameters of our tariffs, that provide value for customersand incremental revenue for the company.

While NiSource will continue improving its systems andcapitalizing on regulatory and commercial business

opportunities, we also will continue our aggressive financialmanagement initiatives. This strengthens our balance sheet,makes cash available for capital expenditures and helps usachieve other key financial objectives.

We are always looking for opportunities to reduce interestexpense. We have hedged the interest rate risk on theissuance of new debt to replace notes, due this year, thatwere issued at the time of the NiSource-Columbia merger. By using forward-starting swaps, we have locked in interestrates (assuming the corporate spread stays the same). Thiswill reduce interest expense by about $18 million for 2006.

We’ll also be looking later this year at a potential opportunityto refinance $1.1 billion of the Columbia debt that wasoriginally issued in 1995. Based on our current interest rateforecast for 2005, we estimate we could save an additional$20 million per year in interest expense beginning in 2006. Our finance team will be carefully watching interest rates and financial markets throughout the year to determine thebest timing for action on this portion of our debt.

Aggressive cost management already has helped us toreduce operation and maintenance expenses by nearly $200 million in the past four years. We’ve done a good job,

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Dennis E. Foster, Retired Vice ChairmanALLTEL Corporation

Little Rock, Ark.

Ian M. Rolland (Lead Director), Retired Chairman & CEOLincoln National Corporation

Fort Wayne, Ind.

John W. Thompson, Chairman & CEOSymantec Corporation

Cupertino, Calif.

Richard L. Thompson, Retired Group PresidentCaterpillar Inc.

Peoria, Ill.

Robert J. Welsh, Chairman & CEOWelsh Holdings, LLC

Merrillville, Ind.

Dr. Carolyn Y. Woo, Martin J. Gillen Dean & Ray & Milann Siegfried Professor of Entrepreneurial Studies

Mendoza College of BusinessUniversity of Notre Dame

Notre Dame, Ind.

Roger A. Young, Retired ChairmanBay State Gas Company

Westborough, Mass.

“Progress is a nice word. But change is its motivator. And change has its enemies.” Robert Kennedy

Transforming Our Cost StructureAggressive Financial

Management Continues

but in order to further reduce expenses, we must transformour corporate processes and invest in technology.

Partnering with a business process outsource provider is oneoption we are exploring for this transformation. We are in themidst of a disciplined process to consider proposals from twopotential providers as part of a balanced, comprehensivebusiness strategy designed to address increasing costchallenges and establish a platform for sustainable growth.NiSource currently is a large user of outsourcing in our day-to-day activities, including numerous construction activities,line locating services and employee benefits administration.We want to determine whether partnering with an outsideprovider will help us transform our business support andtechnological processes more quickly and at levels beyondwhat we can accomplish on our own. An arrangement of thistype also could help us improve our ability to adjust faster tobusiness conditions while maintaining high service levels.

Outsourcing, which typically saves 20 percent to 30 percentof targeted costs, could also help us avoid significant directcapital investments in our old legacy system – capital we canbetter use in support of growth opportunities. We expect tofinalize our decision by June 2005. Regardless of whether wemove forward with outsourcing and the extent to which wedo, we remain committed to transforming our key processesand activities to lower our support costs. This exercise withpotential partners will provide many meaningful benchmarksor standards that may enable us to capture thesetransformation opportunities with a partner and on our own.

Holding down our costs is one way we keep energyaffordable. We owe that to our customers and ourcommunities. Our efforts help the cities and towns we serveby making it easier to attract new business and encourageeconomic development. Not only is affordable energy ineveryone’s best interest, so too is environmentally friendlyenergy.

Our electric subsidiary, NIPSCO, has been continuouslymaking investments in pollution control equipment for itsgenerating facilities during the past 30 years. Today, ourgenerating units have an emissions profile that is better thanmost other utilities in the Midwest.

NIPSCO has spent approximately $251 million since the early1990s to meet SO2 requirements. Between 1990 and 2002, our annual SO2 emissions were reduced by 70 percent andNOx emissions by 50 percent, and we were well ahead ofcompliance mandates in place during that time. We remaincurrently compliant with SO2 and NOx standards.

NIPSCO received state regulatory approval in January 2005for an environmental cost tracker that will increase recoveryon NOx abatement equipment costs from the previouslyplanned level of $274 million to $305 million through 2006-2007.Our environmental performance has and will continue toimprove, with these rate trackers aiding in recovery of costs.

NiSource’s environmental commitment extends beyond ourelectric generation facilities and encompasses virtually everyaspect of our business. We realize that it will become moreexpensive to meet environmental regulations in the future.We believe in taking the high road and staying in the forefrontof these environmental initiatives.

One example of our environmental commitment is ourongoing participation in the U.S. Environmental ProtectionAgency’s Natural Gas STAR Program. The programencourages gas companies to adopt voluntary cost-effectivetechnologies and practices that improve operatingefficiencies and reduce methane emissions.

This past year all 10 of our distribution companies and ourtwo largest gas transmission companies were selected as“Partners of the Year” in the 2004 STAR Program for thenatural gas industry’s distribution and transmission segments.

Another point of pride for the company has been ourinclusion in the Dow Jones Sustainability World Indexes(DJSI World). NiSource is the only U.S. utility to earn thisdistinction for the fourth consecutive year. The DJSI Worlddefines corporate sustainability as a business approach thatcreates long-term shareholder value.

Sustainability leaders embrace opportunities and managerisks that derive from economic, environmental and socialdevelopments. NiSource is one of just three U.S.-basedutilities and only 16 utilities worldwide to be included in this

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Environmental Focus is aCommunity Commitment

“All things are subject to change, and we change with them.” Anonymous

Sustainability Fosters Long-Term Business Growth

Robert C. Skaggs, Jr.

PresidentNiSource Inc.

NI9

Gary L. Neale

Chairman & Chief Executive OfficerNiSource Inc.

year’s DJSI World index – an index that tracks corporate performance in terms of sustainability on a global basis.

From a relatively small local utility, we have indeedtransformed NiSource into a super-regional, integratednatural gas company that is one of the nation’s premierenergy leaders of the future. And, we are well positioned tocontinue to thoughtfully transform your company to not onlyadjust to an ever-changing world, but also to grow andflourish on a sustained basis.

• Our key strengths, including prime growing market areas,strong regulated assets in key markets, and dedicatedemployees, ensure our long-term success and commitmentto growth in stockholder value.

• NiSource has the business structure, the business strategyand the business experience that will enable us to play arole in shaping regulatory initiatives that will furtherenhance regulated revenue growth.

• Our balance sheet and credit ratings are stable, our ongoingcost management efforts focused, and our planned 2005refinancing efforts position us to reduce interest expenseeven further.

• We have already begun to capitalize on infrastructureinvestment opportunities that also will help resolve thenatural gas industry’s supply and capacity constraints in theNortheast and provide incremental revenue in the future.

• We remain committed to financial transparency,sustainability and adherence to the highest ethicalstandards.

• As we look past 2005 to 2006 and beyond, we see greatopportunities for growth in stockholder value by investing inour existing asset footprint.

We thank our employees for their strong efforts during 2004and their continued focus on safety, reliability and customerservice during 2005. We also thank our stockholders for yourconfidence in our continuing progress on key industry andcorporate initiatives – progress that would not be possiblewithout your support and investment.

Sincerely,

Gary L. NealeChairman and Chief Executive Officer

Robert C. Skaggs, Jr.President

March 8, 2005

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Gary L. Neale, Chairman & CEORobert C. Skaggs, Jr., President

Samuel W. Miller, Jr., Executive VP & COOPeter V. Fazio, Jr., Executive VP & General Counsel

Michael W. O’Donnell, Executive VP & CFOS. LaNette Zimmerman, Executive VP, Human Resources & Communications

Arthur E. Smith, Jr., Senior VP & Environmental CounselMark D. Wyckoff, Senior VPLarry J. Francisco, VP, Audit

Jeffrey W. Grossman, VP & ControllerBarbara S. McKay, VP, Communications

Dennis E. Senchak, VP, Investor Relations, Asst. Treasurer & Asst. SecretaryDavid J. Vajda, VP & Treasurer

Gary W. Pottorff, Corporate Secretary

CorporateOfficers

“Change your opinions, keep your principles; change your leaves,keep intact your roots.” Victor Hugo

A GrowthOutlook